Note 5: Operating income
Adjusted operating income
Adjusted operating income at €798 million (2017: €905 million), was impacted by adverse currencies, higher raw material costs and lower volumes, partly compensated by pricing initiatives. Savings from continuous improvement more than offset fixed cost inflation. Creating a fit-for-purpose organization fully delivered on the €110 million planned savings for 2018.
- Decorative Paints was impacted by higher raw material costs and adverse currency effects, partly compensated by higher selling prices and cost savings. ROS was 9.4% (2017: 9.0%)
- Performance Coatings was also impacted by foreign currencies, higher raw material costs as well as lower volumes. ROS was 11.3% (2017: 11.6%)
- Other activities/eliminations decreased by €62 million. 2017 was impacted by one-off items, as well as lower pension and insurance related costs.
Operating income
Operating income was negatively impacted by identified items totalling €193 million, mainly related to restructuring costs for the transformation (€130 million) and a one-off non-cash pension cost (€57 million) based on a UK legal precedent set in October 2018 for the Guaranteed Minimum Pensions (GMP) equalization regulations.
In 2017, operating income was negatively impacted by identified items totalling €80 million, mainly related to the transformation of the Paints and Coatings organization and legal items.
In € millions |
Employee benefits |
Amortization |
Depreciation |
Purchases and other costs |
Total |
Cost of sales |
(505) |
(2) |
(117) |
(4,705) |
(5,329) |
Selling expenses |
(883) |
(46) |
(22) |
(1,231) |
(2,182) |
General and administrative expenses |
(396) |
(8) |
(30) |
(438) |
(872) |
Research and development expenses |
(192) |
(2) |
(12) |
(58) |
(264) |
Other results |
– |
– |
– |
(4) |
(4) |
Total |
(1,976) |
(58) |
(181) |
(6,436) |
(8,651) |
In € millions |
Employee benefits |
Amortization |
Depreciation |
Purchases and other costs |
Total |
Cost of sales |
(506) |
(2) |
(113) |
(4,757) |
(5,378) |
Selling expenses |
(885) |
(53) |
(48) |
(1,333) |
(2,319) |
General and administrative expenses |
(358) |
(12) |
(29) |
(382) |
(781) |
Research and development expenses |
(186) |
(7) |
(12) |
(65) |
(270) |
Other results |
– |
– |
– |
(39) |
(39) |
Total |
(1,935) |
(74) |
(202) |
(6,576) |
(8,787) |
Operating income excluding identified items.
This is a key profitability measure and is calculated as adjusted operating income as a percentage of revenue.
Operating income is defined in accordance with IFRS and includes the identified items to the extent these relate to lines included in operating income.
Identified items are special charges and benefits, results on acquisitions and divestments, major restructuring and impairment charges and charges and benefits related to major legal, anti-trust, environmental and tax cases.